All activities related to securities (both government or corporate) are regulated by the National Securities Commission (NSC). It is an independent organisation, not a part of the government, but reporting directly to the President of the Republic of Kazakhstan. NSC was organised in 1995. It acts as a unique licensing body in the securities market. It controls activities of its professional participants, stock exchanges and issuers and protects their rights. Occasionally, NSC checks the activities of the issuers and other participants of securities market. If any breaches and violations are detected, it has the authority to suspend the issue or revoke the license.

The NSC consists of a chairman (at present - Mr Aben Bektasov), three Executive Directors and three Commissioners, appointed and dismissed directly by the President. The appointment is made upon a recommendation from the Prime Minister. The Commissioners represent the Government, the National Bank and the Office of the President.

In November 1997, the Kazakhstani NSC was admitted to the International Organisation of Securities Commissions (IOSCO). The necessity of entering IOSCO arose from the NSC's goal to form a securities market complying with international standards, to take the Kazakhstani market to a level where it is capable of integrating into global capital markets.

In the middle of 1997 the National Securities Commission worked out and submitted for the government's consideration the draft of the law "On Joint-Stock Companies", which was adopted later that year. This document has become one of the most important documents influencing the securities market. Other crucial documents amended by the NSC were the Civil Code, laws "On licensing", "On Taxation" and some other. By the end of the year, the NSC completed a full package of documentation connected with pension reforms in Kazakhstan, thus marking the actual beginning of the reform itself. The Commission worked with the government on defining packages of state shares in Blue Chip companies to be presented for sale within the framework of the privatisation program.

The year 1997 became the historical year for Kazakhstan's struggle towards the creation of securities market infrastructure. One of the most important achievements of the National Securities Commission was the foundation of the Central Depository. Formerly, all transactions had been registered by the Depository of the National Bank of Kazakhstan. On September 2, 1997 the license for depository activity was issued for the independent Central Depository. The Central Depository is a closed joint-stock company, having among its shareholders the professional participants of the securities market only (each holding one share in the Depository). The requirement of the Central Depository is the capital adequacy level of at least 10,000 minimum indexes.

The National Securities Commission sets great store in the structural and legislative organisation of the market. With this aim, the system of registration was being improved and modified all through 1997. Licences for registration activity are issued by the NSC. Any company with its number of shareholders exceeding 500 is to keep a list of its shareholders and register securities transactions with an independent registrar. When the number of the company's shareholders surpasses 500, the registrar is to be chosen within 3 months.

By the end of 1997, 34 registrars were operating in Almaty and 8 regions of the Republic of Kazakhstan. The territorial distribution of the registrars is very uneven. Fifteen registrars are located in Almaty, and hold 95.2% of all shareholders' registers. Six regions of the republic do not have any registrars. In other regions the number of registrars does not exceed 5.

Capitalisation requirement for Registrars is a capital adequacy of at least 10,000 minimum conventional indexes.

As of the beginning of 1998, three banks were licensed to provide custodian services in Kazakhstan. The first banks to become custodians were Kazkommertsbank and ABN-AMRO bank and in the third quarter of 1997, a licence was also issued for the Almaty Merchant Bank. The number of custodians has now doubled and presently there are three more banks providing these services - the National Bank, Halyk Savings Bank and Temir Bank.

To protect investors' interests, the National Securities Commission established a minimum capital adequacy level of at least 200,000 minimum conventional indexes for a custody.

The Kazakhstan Stock Exchange (KASE) is a non-commercial self-controlled organisation in the form of a closed joint-stock company. In this form, the Kazakhstan Stock Exchange was registered in July 1997.

To properly organise securities trades, in 1996 the National Securities Commission chose a model of a stock exchange. At the end of the year the tender was won by the Kazakhstan Stock Exchange (a part of Kazakhstan Stock Exchange and International Kazakhstan Stock Exchange). 23 banks and financial institutions became the founders of the KASE. To date, the number of shareholders reached 31. The KASE was established to trade corporate and government securities. The trades are held in the regime of continuous auction (in the electronic system). At the end of 1997 the companies participating in the Exchange, received an opportunity of trading in the regime of remote access. The first trades for corporate shares started in September 1997. The company that was first included into the listing of KASE was the joint-stock bank Neftechimbank. First, the trades were held twice a week, starting from February 1998 they are organised on a daily basis. This has become a promotional step towards the establishment of steady trades.

Following Neftechimbank, shares of other enterprises were being included into different listings of KASE, so that presently they number 23.

Trades for government securities on the KASE were suspended in 1996. For a year the T-bills and National Bank notes were traded on the OTC market only, the trades being registered and controlled by the Central Depository. Starting from early 1998 the trades were renewed.

On the general assembly of the Federation of Euro-Asian Stock Exchanges (FEAS), held in Pakistan in October 1997, the Kazakhstan Stock Exchange was admitted as a member of the Federation.

The Kazakhstan Stock Exchange established strict requirements for the companies to be traded on the exchange. The listing of KASE comprises 5 categories: A-listing, B-listing, Additional listing (pre-listing), Non-listed companies and State Blocks of Shares.

To be included into the A-listing, a company is to have background of at least three years of operation, to be profitable for the last two years, to have over 500 shareholders and the registered issue in the equivalent of at least US $1 mln. and to be audited by an acknowledged audit company for the last three years. As at 1997 year end, the only company listed in A-listing was Kazkommertsbank. In April 1998, the A-listing was added by common shares of Neftebank.

Companies included into the B-listing of KASE are to operate for at least one year, to have shareholders numbering over 100 and an issue of at least 10,000 shares. The issued volume is to exceed US $500,000 in equivalent. As at May 1998 the B-listing of KASE includes shares of four companies: common shares of Lariba Bank, common and preferred shares of Shymkent Oil Refinery (SOR), common and preferred shares of Kazakhtelecom, common and preferred shares of Ust-Kamenogorsk Titanium and Magnesium Plant (UKTMK).

The documentation for A and B listings is to be submitted in the form complying with the new accounting standards. Besides, the companies are to be audited by the authoritative and widely acknowledged auditing company.

The pre-listing floor trades common and preferred shares of 8 companies: Aidabulsky Distillery, Altyn Den (granary), Aluminium of Kazakhstan, JSC Borly (coal producer), Kazchrome, MangystauMunaiGas (Kazakhstan's largest oil and gas producer), Neftechimbank, AktobeMunaiGas (the third largest oil producer in Kazakhstan).

Due to various reasons, some companies cannot be included in either listing - therefore they are traded on the non-listing floor of the Kazakhstan Stock Exchange. These companies are: KazZinc (metallic zinc, refined lead, refined copper, gold and silver producer), EmbaMunaiGas (the oldest oil-producing enterprise), Atyrau Refinery, Kostanai Asbestos (asbestos producer in north Kazakhstan), ChymkentPivo (beer producer in south Kazakhstan), Asil-Su (alcohol producer in north Kazakhstan), NIPTIP (research institute of food industry), Etalon Plant (testing equipment producer located in Almaty), KazakhMys corporation (consisting of non-ferrous metals producer JezkazganTsvetMet and several more enterprises of similar profile).

A company listed in any listing (except for A-listing) can be upgraded to a higher one upon the submission of appropriate documentation.

Also the Kazakhstan Stock Exchange trades state packages of shares (sold in lots) in 34 companies (as at January 1998 they were 6 only).

As at the beginning of 1998, the most popular corporate securities on the market are common and preferred shares of JezkazganTsvetMet, common shares of Kazchrome, common and preferred stocks of AktobeMunaiGas, common and preferred shares of MangystauMunaiGas, common shares of JSC Merei (on the OTC market), preferred shares of Kazakhtelecom. The securities with maximum turnover are preferred shares of AktobeMunaiGas.

In April 1997, the general annual meeting of shareholders of the Kazakhstan Stock Exchange came to the resolution to separate currency and securities trades by different Exchanges. Thus, the Almaty Financial Instruments Exchange (AFINEX) was formed. It took over the trades for foreign currencies, futures, and other financial instruments, with the exception of securities.

The AFINEX accumulates and gives circulation to the major part of free capital available on the market. In 1996 it sterilised US $1.3 bln and DM 15 mln. In 1997 the traded volume slightly decreased and reached US $1.1 bln and DM 11.2 mln. by the end of the year. Trade for Russian Rouble amounted to a considerable volume in 1996 - US $11.4 mln (RR 152.5 mln), while in 1997 no trade was held for this currency at all.

In 1997, 257 transactions were held at the AFINEX. Those with the Dollar accounted for 99.4% of the total traded volume, with the Deutsche Mark - for 0.6%.

But most trades are still made on the inter-bank currency exchange market. Total traded volume exceeded US $ 2.3 bln, trades for the DM amounted to DM 46 mln, transactions with Russian Rouble totalled RR 490 bln.